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The government is funding businesses and projects it thinks are "sexy" claims a new report by a right-leaning lobby group.

The Taxpayers' Union, which wants lower taxes and limited government, today released its annual analysis of the Budget.

One example highlighted in the report is Rocket Lab, which develops and launches rockets and has received up to $25 million in Government funding over five years.

"It is the perfect example of a business that, because it is politically sexy, politicians throw taxpayer money at it," said Jordan Williams, executive director of the Taxpayers' Union. "It is unfair to tax businesses more, in order for politicians and bureaucrats to give subsidies to favoured industries."

Authored by economist and the group's research fellow Jim Rose, the report concludes that the Government will this year spend the equivalent of $803 per household on what it calls "corporate welfare" - up from $723 in 2014/15.

The report defines corporate welfare as subsidies to businesses, including state owned enterprises.

But Economic Development Minister Steven Joyce has rejected the report, saying what is included under the definition of corporate welfare is flawed, and that spending on research and development will grow the economy.

"To brand things like tourism promotion and building cycleways as corporate welfare is, I think, creative but not accurate at all."

The Any new kids at the trough? report finds the growth areas in spending include irrigation construction subsidies (about $100 million a year) and research and development.

Science and innovation funding now distributes $250 million to co-fund commercialisation of research and start-ups, the report states.

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Mr Joyce said the report was "just somebody picking out a whole bunch of government programmes that in many cases don't involve payments to firms at all".

"Those that do involve payments to firms are specifically designed to encourage the development for example of the business R&D industry. Politicians don't choose them.

"If they told New Zealanders that in their view tourism promotion should be cancelled, the film industry should close down, that their shouldn't be any ultra-fast broadband...I don't think people would be that enamoured with it."

On irrigation funding, the Government has cited a recent report by NZIER that found irrigation contributes $2.2 billion to the national economy.

It is less content with its spending on KiwiRail. The Budget's two-year $190.2 million funding package for the SOE came with a warning, with Transport Minister Simon Bridges saying ongoing subsidies at that level are "unsustainable".

"It is core infrastructure and it has wide economic benefits...if we close down the rail network it would be hugely costly in terms of the number of trucks that would then be on the roads, in terms of congestion, road maintenance, road safety, and higher costs for businesses in terms of moving their goods."